The Federal Open Market Committee voted on Thursday to hold the federal funds rate at 3.50% to 3.75%. The decision ends a streak of three consecutive quarter-point increases. Under Chair Kevin Warsh, the central bank indicated that while consumer demand remains high, recent easing in service-sector inflation allows for a period of observation.
"We are seeing progress in labor market rebalancing," Warsh said during the press conference in Washington. "Wage growth has settled near 3.2% annually, which aligns with our long-term goals. We see no immediate need to adjust policy further until we examine Q3 consumer credit reports."
Bond Yields and Market Response
Bond yields fell slightly following the announcement. The 10-year Treasury yield slid four basis points to 3.82%, while the two-year yield dropped to 4.05%. Equity markets reacted with moderate gains. The S&P 500 rose 0.4% in afternoon trading, led by utility and financial stocks that benefit from rate stability.
Some economists believe the Fed is done hiking for the year. "The tone was neutral but cautious," says Elena Rostov, chief macro strategist at Vanguard. "Warsh is leaving the door open for cuts late in the autumn if unemployment moves past 4.2%."
